PER WASEEM AHMED ACCOUNTANT MEMBER:

1. The captioned two appeals have been filed at the instance of theRevenueagainst the separate orders of the Learned Commissioner of IncomeTax(Appeals)-6, Ahmedabad, (in short “Ld. CIT(A)”) arising in the matterofassessment order passed under s. 143(3) of the Income Tax Act 1961(here-in- after referred to as "the Act") relevant to the Assessment Years 2010-2011&2011-12.

First, we take up ITA No. 583/AHD/2020 for AY 2010-11, anappeal bythe Revenue.

2. The Revenue has raised the following grounds of appeal:

I. The Ld. CIT(A) has erred in law and on facts in deleting the disallowanceof Rs.3,32,00,000/- on account of advertisement expenditure without appreciatingthat theassessee had failed to establish any business exigency pertains to that advertisements.

II. The Ld.ClT(A) has erred in law and on facts in deleting the disallowanceof Rs.3,32,00,000/- on account of advertisement expenses without appreciating the fact that all advertisements mention only two words 'Xeon Devices' and do not mentioneventheaddress of the assessee or the product of the assessee. These advertisements cannot inany way be construed to serve business purpose of the assessee.

III. The Ld.ClT(A) has erred in law and on facts in deleting the disallowanceof Rg.3,45,576/- on rejection of higher depreciation on certain vehicles.

IV. The Ld.CIT(A) has erred in law and on facts in deleting the disallowanceofdepreciation amounting to Rs. 1,01,88,712/- on building and Rs. 2,946/- on furnitureandfixtures.

V. The Ld.CIT(A) has erred in law and on facts in deleting disallowance of interestexpenditure of Rs. 68,20,411/- paid to M/s. Sigma Welmess Pvt Ltd.

VI. The Ld.CIT(A) has erred in law and on facts in deleting the disallowanceofdeduction of Rs. 6,01,593/- on account of building repairs and maintenance.

VII. On the facts and circumstances of the case, Ld C1T(A) ought to have upheldtheorder of the Assessing Officer.

VIII. It is, therefore, prayed that the order of Ld CIT(A) may be set aside andthat ofthe Assessing Officer be restored.

3. The first issue raised by the Revenue in ground No. 1 and 2 is that theLd.CIT(A) erred in deleting the addition made by the AO for Rs. 3.32croresonaccount of advertising expenses.

4. The brief stated facts are that the assessee in the present case, alimitedcompany, is engaged in the manufacturing business of surgical items. Theassessee owns and runs one Division in the name of “Xeon devices” whichhas incurred advertisement expenses amounting to Rs. 3.32 crores inthelocal newspaper i.e. “Sakshi” based in Hyderabad, which were paid toM/sJagati Publication House. It was submitted by the assessee that it has beensupplyingsurgical items mainly to one company i.e. Shelby Limited, which was goingtostarta new Hospital in the city of Hyderabad. Thus, to create an awareness aboutitsproduct, the assessee has incurred advertising expenses. The purposeof suchexpenses was to capture new Geographical areas and to retain existingbuyerbeing Shelby Limited. The assessee in support of advertisement expensehasfiledledger copy, bills and newspaper cutting. Thus, it was contended by theassesseethat such expenditure has been incurred purely for the purpose of businessandtherefore the same should be allowed as deduction u/s 37(1) of the Act.

5. However, the AO noticed that the assessee is supplying its surgical itemtoone party namely Shelby Ltd. which is evident from the data of the precedingandsucceeding years. The Shelby Limited has its own significance/ influenceinthesurgical manufacturing business of the assessee and therefore they arerelatedparties. As per the AO, if 100% sale is to be made to the limited party, therewasno need to incur any advertisement expense. The AO also observed that thenameof the assessee was nowhere appearing in the advertisement but onlycontainedthe name of its division i.e. “Xeon devices”. The AO also found that theassesseehas incurred advertisement expenses in the preceding year of Rs. 2,12,672.00under the head selling and distribution expenses which has escalatedintheyearunder consideration to Rs. 3,36,81,475/- only. Based on the above, theAOwasofthe view that there was no business expediency for incurring such expensesandtherefore he disallowed the same by adding to the total income of the assessee.

6. Aggrieved, assessee preferred an appeal to the Ld. CIT(A).

7. The assessee before the Ld. CIT(A), submitted that there was noinfluenceof it in the Shelby Limited and therefore there is no question of applyingtheprovision of section 40A(2)(b) of the Act. It was also submittedthat the advertisement expenses were carried out in major cities which were not limitedtoany area. The assessee furnished the list of the cities and the amountofexpenditure incurred in those cities for the advertisement. As per the assessee, itsturnover after incurring advertisement expense, has increased manifoldwhichalsojustifies commercial expediency. The surgical items manufactured by theassesseewere used for the patient who are taking treatment fromShelby Hospital. Assuchthe patient will opt the surgical item manufactured by the assessee only if theyareaware of the surgical items. As per the assessee, the expenses were incurredforcreating awareness in the public at large. Thus, such expenses shouldbeallowedas deduction.

8. The Ld. CIT(A), after considering the submission of the assesseedeletedthe addition made by the AO by observing as under:

6.7 The copy of enquiry report received by undersigned was forward to appellant andappellant has filed his rejoinder wherein it was mainly contended that in responsetosummons issued to Jagati Publication, director of said company has submittedrelevantinformation wherein it was stated that advertisements were published in master headposition in the main paper of newspaper which is carried out in all editions. Thesaidcompany has also submitted copies of bills raised and copies of newspapers inwhichadvertisement was published. The appellant has claimed that as publisher hasalsoresponded to summons issued by DDIT(Inv), supplied relevant information calleduponand there is nothing in such report-which can prove that appellant has incurredbogusexpenditure, disallowance made in assessment order deserves to be deleted.

6.8 On perusal of relevant facts on record along with inquiry report receivedfromDDIT(Inv) , it is observed that during the year under consideration, appellant has madeadvertisement payment of Rs 3,32,00,000/- to Jagati Publication Limited. Theappellant has submitted copy of ledger account of such party along with bills raisedbysuch party and relevant advertisement cutting of newspapers wherein such advertisementis published. The AO has not disputed the fact that payment was made throughaccount payee cheques and there is nothing on record which can prove that appellanthas received cash against such cheque payment. The AO has even not disputedthefactthat advertisement of appellant company was published .in newspaper. called"Sakshi"published by Jagati Publication in relevant period in all their editions. The AOhas doubtedgenuineness of such expenditure mainly on the ground that there was no need"forincurring of such expenditure when majority sales were made to Shalby limited. It isundisputed fact that appellant is engaged in business of manufacturing of surgical itemsand trading of implants and surgical items and as pointed out by AO in assessment order,almost 99% sales of appellant company is to Shalby Limited. It is undisputedfact thatadvertisement was for the purpose of the devices and implants in which the assessee-company is trader. The AO has failed to appreciate the fact that as Shalby limitedwascarrying out substantial advertisement campaign in South India to cater morepatientsfrom such region, appellant company has also made similar campaign in South India. TheAO ought to have appreciated the fact that as entire business of the appellant-companydepended upon the purchase orders in respect of surgical equipments and kneeimplants received from Shalby Limited, it was entirely in the interest of assessee's businessthatShalby Limited is able to get greater number of patients requiring these implants andbycarrying out such advertisement campaign appellant highlighted such aspects andif,Shalby limited was able to obtain higher patients from such region, business of appellantitself would increase significantly hence appellant company has also madesuchadvertisement in two years which were in line with Shalby limited. Merely becauseappellant's majority sales are to Shalby limited, AO cannot disallow such expenditureonthe ground that there was no need on part of appellant to incur such expenditure. It ismatter of fact that once business of Shalby limited is increased, business of appellantwould automatically increase and by making such advertisement, if some benefits arealsoreceived by other company, expenditure incurred by appellant cannot be disallowmerelyon presumption that there was no necessity to incur such expenditure. Theratioofdecision of Hon'ble Gujarat High Court in the case of CIT V/s KhambhataFamilyTrust, 215 Taxman 602 [LQ/GujHC/2013/480] , squarely applies to facts of the case wherein court has heldasunder:

"Section 37(1) of the Income-tax Act, 1961 - Business expenditure -Allowabilityof[Advertising expenses] - Whether once it is found that expenditurehasbeenincurred by assessee for publicity or advertisement, it is not for departmenttoconsider what commercial expediency justify such expenditure; merefact thaton account of expenditure incurred by assessee wholly and exclusivelyforitsown business, incidentally some third party is also benefited is nogroundtodisallow any part of such expenditure - Held, yes - Assessee procured usagerightsfor brand "Rasna" for a valuable consideration and incurred advertisement expensesinrespect of products manufactured by it under such brand name - Assessing Officer notedthat by advertising said brand, other parties were also benefited and an intangibleassetwas created, which was not even owned by assessee and, therefore, expenses relatablethereto were not for business purpose of assessee but were capital in nature- Hedisallowed said claim - Whetner since said expenditure was expended exclusivelyforassessee's business, merely because by virtue of such advertisements brandvalueofRasna was enhanced and other manufacturers of brand were also indirectly benefited, itcould not be said that expenditure incurred by assessee was not wholly and exclusivelyforits own business - Held, yes - Whether, therefore, disallowance was to be deleted- Held,yes [Para 9] [In favour of assessee]" [1951] 20 ITR 1 [LQ/SC/1951/33] , CIT v. ChandulalKeshavlal andCo.[1960] 38 ITR 601. [LQ/SC/1960/41]

6.9 The AO observed that appellant is making substantial sales to related concernorenterprise influence by key management personal hence there was no needtoincuradvertisement expenditure. If sales would have been made to third party or unrelatedparty, AO stated that he would have accepted contention of appellant regardingneedofadvertisement expenditure. This contention of AO cannot be accepted for the reasonthateven if sales is made to related concern, there is no observation in assessment order ofappellant company or Shalby limited that there is diversion of any expenditure or salesarenot made at fair market rate. Merely making majority sales to related concerndoesnotmake expenditure incurred by assessee to be non-genuine unless there is othercorroborative evidences that expenditure was not actually incurred. The appellant hasalready explained the reason for incurring of such advertisement expenditure incurrentyear and such contention is already found tenable in preceding paras hence disallowanceof advertisement expenditure on fallacious ground cannot be upheld.

6.10 It is observed that AO has disallowed advertisement expenditure payment madetoJagti Publication on the ground that there was no necessity to incur such expenditure. It ispertinent to refer to decision of Gujarat High court in the case of CommissionerofIncome-tax v. M/s Gujarat Narmada Valley Fertilizer and Chemicals Ltd. R/TaxAppeal No.146 of 2019 dated 16/06/2019 has explained the meaning of "whollyand exclusively for the purpose of earning the income from the business or profession" inthecontext of section 37 as under:

"8. We are of the view that as long as the expenses are incurred wholly and exclusivelyforthe purpose of earning the income from the business or profession, merely becausesomeof these expenses are incurred voluntarily, i;e. without there being any legal or contractual ooligaticn to incur the same, those expenses do not cease to be deductible in nature. Inother words, it is not necessary that the businessman alone wouldincuranyfurtherance of his business pursuits. We find guidance froma passage fromthejudgment of the House of Lords in the case of Atheron v. British Insulated S.HelsbeyCables Ltd. [1925] 10 Tax Cases 155 (HL), referred to with approval by the SupremeCourtin the case of CIT v. ChandulalKeshavlalSt Co. [1960] 38 ITR 601 [LQ/SC/1960/41] , which reads as follows:"It was made clear in the above cited cases of Usher's Wilshire Brewery v. Bruce(supra)and Smith v. Incorporated Council of Law Reporting [1914] 6 Tax Cases 477 that asumofmoney expended not with a necessity and with a view to direct immediate benefit tothetrade, but voluntarily and on the grounds of commercial expediency and inorder toindirectly facilitate, carrying on of business may yet to be expended wholly and exclusivelyfor the purpose of trade; and it appears to me that the findings of the CIT in thepresentcase, bring the payment in question within that description. They found (in words whichIhave already quoted) that payment was made for the sound commercial purposeofenabling the company to retain the existing and future members of staff and for increasingthe efficiency of the staff; and after referring to the contention of the Crown that thesumof Sterling Pound 31,784 was not money wholly and exclusively laid out for the purposeofthe trade under the rule above referred to, they found deduction was admissiblethusineffect, though not in terms, negativing the Crowns contentions, I think that therewasample material to support the findings of the CIT, and accordingly hold that this prohibitiondoes not apply."

8.1 Thus, the aforesaid makes it clear that even if an expense is incurredvoluntarily it may still be construed as "wholly and exclusively". Explainingthisprinciple, the Hon'ble Supreme Court has, in the case of Sassoon J David &Co. (P) Ltd. vs.CIT [(1979) 118 ITR 261 (SC)] inter alia observed that :

"It has to be observed here that the expression "wholly and exclusively" usedins.10(2)(xv) of the Act does not mean "necessarily". Ordinarily, it is for the assesseetodecide whether any expenditure should be incurred in the course of his or its business.Such expenditure may be incurred voluntarily and without any necessity andif it isincurred for promoting the business and to earn profits, the assessee can claimdeductionunder s. 10(2) (xv) of the Act even though there was no compelling necessity to incur suchexpenditure. It is I.T.A. N0.99/BLPR/2012 Assessment year: 2008-09 relevant torefer atthis stage to the legislative history of s.37 of the IT Act,1961, which corresponds tos.10(2)(xv) of the Act. An attempt was made in the IT Bill of 1961 to lay downthe"necessity" of the expenditure as a condition for claiming deduction under s. 37. Sec. 37(1)in the Bill read "any expenditure..laid out or expended wholly, necessarily and exclusivelyfor the purposes of the business or profession shall be •allowed." The introductionof theword "necessarily" irrthe above section resulted in public protest. Consequently, whens.37 was finally enacted into law, the word "necessarily" came to be dropped. Thefact thatsomebody other than the assessee is also benefited by the expenditure should not comeinthe way of an expenditure being allowed by way of deduction under s. 10(2)(xv) of theActif it satisfies otherwise the tests laid down by law."

8.2 The words used in Section 37(1) of the Act are "wholly and exclusivelyforthe purpose of business". In normal legal parlance the word "wholly"wouldmean entirely and the word "exclusively" would mean solely. Thus, it givesanimpression or it could be argued that any element of expenditure not laidoutentirely and solely for the purpose of profession or business wouldnotbe covered by Section 37(1) of the Act. One needs to examine this fromtheperspective of the assessee who does make the expenditure. However, asexplained by the Supreme Court the expression "wholly and exclusively"doesnot mean "necessarily". It is for the assessee to decide whether anyexpenditure should be incurred in the course of its business.

8.3 We have noticed that Section 57(iii) of the Act contains similar phrases "whollyandexclusively for the purpose". Section 57 of the Act is with regard to the deductions. Section57(iii) reads as under :

Section 57(iii) :- any other expenditure (not being in the nature of capital expenditure)laid out or expended wholly and exclusively for the purpose of making or earningsuchincome."

8.4 Section 37 talks about the expenditure wholly and exclusively for the purposesofthe business whereas, Section 57(iii) talks about the expenditure -wholly and exclusivelyfor the purpose of making or earning such income

8.5 In CIT v. Malayalam Plantations Ltd, [1964] 53 ITR 140 [LQ/SC/1964/136] , the SupremeCourtobserved that "the expression 'for the purpose for the business' is wider in scopethanthe expression 'for the purpose of earning profits'". Similar observation has alsobeenmade in CIT v. Birla CottornSpg. And Wvg. Mills Ltd. [1971] 82 ITR 166 [LQ/SC/1971/402] , wheretheSupreme Court expressed the view that the expression 'for the purpose of the business' is essentially wider than the expression "for the purpose of earning profits". Thedecision in Malayalam Plantations has been freely drawn upon by courts for layingdownthat the provisions of s. 37(1) and similar provisions of s. 10(2)(xv) of the 1922Act inwhich the expression "for the purposes of the business" is used, have wider implicationthan the provisions of s. 10(2) of the 1922 Act which used the words "for thepurposeof....... earning such.... profits" and the provisions of s

57(iii) in which the expression "for the purpose of making or earning such income" isused.(See for example, PadmavatiJaykrishna's case [1975] 101 ITR 153 [LQ/GujHC/1973/166] ). That this viewisjustified is amply borne out by the different approaches adopted in two decisions of theSupreme Court in relation to a claim for deduction in respect of the sameitemofexpenditure. In T. S. Krishna v. CIT [19731 87 ITR 429 (SC), a claimfor deductioninrespect of wealth-tax paid on snares neld by tne assessee was held to oe not a permissiblededuction under s. 57(iii) even apart from or irrespectives of the provisions of s. 58(1A).As against this, we have the decision in Indian Aluminium Co. Ltd. v. CIT [1972] 84ITR735, wherein wealth-tax paid by the assessee, which was a trading company, onassetsheld by it for the purpose of its business, was held to be deductible as a business expenseunder s. 10(2)(xv). These two decisions illustrate that different approaches are necessarywhen the same item of expenditure has to be judged from the standpoint of s. 37(1)onthe one hand and s. 57(iii) on the other and that the scope of the provisions is not thesame, Reference may also be made in this connection to the decision of this court inCommissioner of Expenditure-tax V/s. Mrs. Manorama Sarabhai [1966] 59 ITR262. Inthatcase, it was pointed out that the words "for the purpose of" were used in s. 5(a) of theExpenditure tax Act, 1957, in connection with the words "the business, profession,vocation or occupation" and also in conjunction with the words "earning income fromanyother source" and it was observed that (p. 266) :

"The legislature has thus provided disjunctively for different categories of expenditureandit is not right that the concept underlying one category should be imported into theother."These observations, though they are made in a different context, are apposite injudgingthe relative scope of ss. 37(1} and 57(iii). Even apart from authority, on a comparisonofthe language of s. 37(1) and s. • 57(iii), it becomes clear that the scope of theformersection is essentially wider than that of the latter. The word "business" used in s. 37(1)inassociation with the expression "for the purposes of" is a word of wide connotation. A observed by the Supreme Court in Narain Swadeshi Weaving Mills v. CEPT [1954] 26ITR765 at p. 773 :

"The word 'business' connotes some real substantial and systematic or organisedcourseofactivity or conduct with asset purpose."

8.6 In the context of a taxing statute, the word "business" wouldsignifyanorganised and continuous course of commercial activity, which is carriedonwith the end in view of making or earning profits. Under s. 37(1), therefore, theconnection has to be established between the expenditure incurredandtheactivity undertaken by the assessee with such object. "

Similarly, the view taken by the Bombay High Court in Phaltan Sugar WorksLtd. v.CIT [1995] 215 ITR 377 that once it is established that there was nexus betweentheexpenditure and the purpose of the business (which need not necessarilybethebusiness of the assessee itself), the Revenue cannot justifiably claimto put itself inthearm-chair of the business or in the position of the board of directors and assumetheroleto decide how much is reasonable expenditure having regard to the circumstances of thecase. No businessman can be compelled to maximize his profit. The Income-tax authoritiesmust put themselves in the shoes of the assessee and see how a prudent businessmanwould act. The authorities must not look at the matter from their own viewpoint but thatof a prudent businessman. The appellant has also relied upon decision of Athertonv,British Insulated and Helsby Cables Ltd. [1925] 10 TC 155, it was held by the HouseofLords that in order to claim a deduction, it is enough to showthat themoneyisexpended, not of necessity and with a view to direct and immediate benefit, butvoluntarily and on grounds of commercial expediency and in order toindirectlyto facilitate the carrying on the business. The above test in Atherton'scase[1925] 10 TC 155 (HL) has been approved by this court in several decisions, e.g..Eastern Investments Ltd. v. Ld. CIT(A).

6.11 The ratio of various decisions discussed herein above clearly Apply to the facts of thecase in as much as , the AO is not empowered to decide the business necessityofexpenditure. Once assessee company has incurred expenditure, submitted supportedevidences, even payee has admitted to have received consideration andothercorroborative evidences support the claim of assessee that actual expenditure was incurred,disallowance of expenditure cannot be made on the ground that there is no immediatebenefit that has accrued to assessee or there was no requirement to incur suchexpenditure as made in present case

6.12 It is observed that during the course of appellate proceedings, my predecessor CIT(A)has directed AO to make necessary enquires of such publisher and DDIT(Inv), Hyderabadhas made necessary enquiries and submitted his report on 06/12/2018. On perusal of suchreport, it is apparent that director of publisher company has complied with details calledbyAO which includes copy of bill statement, c°Pyj£;-bjlls raised for advertisement toappellantand copies of newspapers in which such advertisement is published. The director of saidpublisher has categorically stated that advertisement are published in the Master HeadPosition of business page in the main newspaper which is carried out in all the editionsandthese facts clearly prove that actual advertisement has happened and support thecontention of appellant that it was published on first page. Once the advertisement ispublished on first page as well as appearing in Master head, it clearly attract^theusersand rates of such advertisement are usually on higher side. The director" oT saidpublisherhas categorically stated that advertisement given by appellant was at premiumratesasitinvolves brand value of company and generally advertisement in this space wasnotnormally provided by publishers hence there was no comparable rates. These facts arenotrebutted by DDIT(Inv) in his report nor AO has brought any other evidences hencecontention of AO that advertisement published in newspaper was small in sizewhereas rate charges by publisher was on higher side cannot be accepted. Eveninentireassessment order, there is no whisper to the fact that rates charged byotheradvertisement agencies in "South India" charge lower rate than rates charges by publisher.It is matter of fact that Jagati Publication is not a related concern u/s 40A(2)(b) anddirector of said company has admitted the fact that they have received advertisement fromappellant company and have charged premium rates hence contention of AOthatadvertisement expenditure incurred by appellant was not genuine cannot be accepted. 6.13 It is observed that appellant has given complete details of expenditure alongwithsupporting evidences , AO has made necessary enquires of publishers basedupondirection given by my predecessor CIT(A), and no concrete evidences are brought onrecord that such expenditure was non genuine, it is found that disallowance madebyAOison presumption hence cannot be sustained. The appellant has rightly relied upondecisionof Hon'ble Delhi High court in the case of PCIT-7 v/s Rambagh PalaceHotels(P)Ltd 98 taxrnan. Com 167(2018) wherein it has been held that

"Section 37(1) of the Income-tax Act, 1961 - Business expenditure -Allowability of (Repairand maintenance charges) - Assessment year 2005-06 - Assessee-company, runningahotel, claimed expenditure on account of repair and maintainance charges paidbyit -Assessing Officer allowed repair and maintenance charged paid to four parties, whohadappeared before him and whose statements were recorded on oath - However, balancerepair and maintenance charges was disallowed to extent of 50 per cent, on groundofabsence of supporting documents - Commissioner (Appeals) observed tnat assesseehadfiled ' parawise details of partly disallowed repair and maintenance expense withnames,PAN number of vendors and amount paid to them

Assesses had also furnished details of foreign suppliers, with copies of bills of ladingetc. -However, assessee was not able to furnish confirmation from one, GC to whompayment ofcertain amount was made - Accordingly Commissioner (Appeals) observed that therewasno justification to make disallowance of 50 per cent but he disallowed expendituretoextent of 5 per cent on account of GC - Further, Tribunal had recorded that assesseehad produced details of all vendors, including their PAN numbers, invoicesraised by them, etc.; therefore, Commissioner (Appeals) was not rightinmaking disallowance of 5 per cent on ground of mere suspicion-WhetherTribunal was justified - Held, yes [Para 7] [In favour of assessee]"

6.14 It is observed that AO has made disallowance of advertisement expendituremerelyon presumption and no concrete evidences were brought on record to prove his contentionthat expenditure incurred by appellant was bogus. The appellant has already'""providedbusiness expediency of such payment. Considering the facts discussed herein above, andrelying upon decisions referred supra, disallowance made by AO for Rs 3,32,00,000/-isdeleted. This ground of appeal is allowed..

9. Being aggrieved by the order of the ld. CIT-A, the Revenueisinappeal before us.

10. Both the ld. DR and the Ld. AR before us relied on the order passedtheauthorities below as favourable to them.

11. We have heard the rival contentions of both the parties and perusedthematerials available on record. From the preceding discussion, we notethat theassessee has incurred advertisement expenses amounting to Rs. 3.32 croreswhichwas published in the local newspapers majorly in South India. The assesseehasmade the payment to the publication house namely Jagati PublicationLtd. Theassessee manufactures the surgical items, and it was the contentionof theassessee that the advertisement was published in the local newspapers tocreatethe awareness of the surgical items manufactured by the assessee. It isalsoundisputed that the assessee is mainly supplying its surgical items toasingleparty, namely Shelby Limited. Thus, it was alleged by the AO that sincetherewasa single party being the buyer of the surgical items manufactured by theassessee,there was no need for the assessee to spend so much of the moneyontheadvertisement of its surgical items. First, it is to be noted that what expenditureisto be incurred for the purpose of the business is purely a call or decisiontobetaken by the management. As such, the AO cannot enter or occupy thearmchairof the assessee to decide what is necessary for carrying out its business. Assuchit is the sole responsibility of the assessee to carry out the business inthemosteffective manner according to its best understanding. Nobody can questiononthebusiness expediency of expenditure incurred by the assessee for runningitsbusiness until and unless some adverse materials are brought on record. Inthepresent case, the genuineness of the expenses has nowhere been doubted. Onlyitwas the allegation of the AO that, there was no need for incurring so muchof theexpenditure on the advertisement because there was single buyer of thesurgical items manufactured by the assessee. It seems to us that the AOhas not correctlyunderstood the underlying reasons for incurring the expense on the advertisementof its product. In the present case, the assessee’s main buyer i.e. ShelbyLtdwasgoing to start or operate its hospital activity in South India. The assesseetocreatean awareness of its surgical items to be used by Shelby Ltd. has undertakenanawareness campaign by way of advertisement. Indeed, the patients takingthetreatment from the hospital namely Shelby limited require surgical items. TheShelby Limited shall recommend the name of the surgical items manufacturedby the assessee. Admittedly, the Shelby Ltd is the sole buyer of the surgical itemsmanufactured by the assessee. Thus, the patients coming for the treatment totheShelby hospital will prefer to use the surgical equipment manufacturedbytheassessee only in a situation when they are aware of the product. Thus, it becomesnecessary for the assessee to create awareness in the market so that thepatientswhile taking the treatment from Shelby hospital prefer the surgical itemsmanufactured by the assessee. Admittedly, the turnover of the assesseeaftertheadvertisement has increased manifold. Thus, in such facts and circumstances, weare of the view that the assessee after incurring such huge advertisementexpenses was able to fetch better sale of its products in the market. Accordingly,we hold that the advertising expenses were incurred by the assesseeforitscommercial purposes. Hence, we do not find any merit in the groundfiledbytherevenue and accordingly we dismiss the same. Hence the ground of appeal filedby the revenue is hereby dismissed.

12. The next issue raised by the Revenue in ground No. 3 is that theLd. CIT(A)erred in deleting the excess depreciation disallowed by the AO on the vehicles.

13. The AO during the assessment proceedings found that the assesseehasclaimed depreciation on the vehicle purchased by it in the year underconsideration at 50% after making reliance on the notification issued bytheCBDTbearing No. 10/19 dated 19/01/2009. As per the AO, the vehicles wereeligiblefordepreciation at the rate of 15% whereas the assessee has claimed depreciationataccelerated rate i.e. 50%. Thus, the AO worked out the excess depreciationat Rs.34,576/- and added to the total income of the assessee.

14. Aggrieved assessee preferred an appeal to the Ld. CIT(A) andsubmittedthat the new commercial vehicle goes within the meaning of Light Motor Vehicleas defined under section 2 of the Motor Vehicle Act. Therefore, thesameisdepreciated at the rate of 50%. The Ld. CIT(A), after considering thesubmissionof the assessee allowed the appeal of the assessee by observing as under:

7.4 On careful consideration of entire facts, it is observed that AO has deniedhigherdepreciation on vehicles purchased during the year only on the ground that it is availableto commercial vehicles only and assets purchased by appellant is not registeredascommercial vehicle in RTO. It is observed that Hon'ble Ahmedabad ITAT in thecaseofNabros Transport P.Ltd. in ITA No 311/Ahd/2019 dated 04/12/2019allowedhigher depreciation and held as under:

"5. We have considered rival submissions and gone through the record carefully. Issuebefore us is with regard to the allowability of enhanced depreciation on newvehiclesacquired by the assessee during 01.01.2009 to 01.10.2009. Now as per the amendedCBDT Circular No.10 of 2009, new commercial vehicle which is acquired on or after the1stday of January, 2009 but before the 1st day of April, 2009 and is put to use beforethe1stday of April, 2009 for the purposes of business or profession, the assessee is entitledfordeprecation at 50% on such vehicles. This aspect has been considered by the ITATintheassessee own case in ITA No.2847/Ahd/2017 and held that ITA No.345/Ahd/2018enhanced rate is applicable to the subsequent year also. The relevant portion of theITAT'sorder reads as under

"8. We have carefully considered the rival submissions. The eligibility of depreciationataccelerated rate on new commercial vehicles acquired between 01.01.2009 to 01.10.2009is in controversy. As noted extensively in earlier paras. Notification No.' 10/2009issuedbythe CBDT dated 19.01.2009 along with subsequent modification therein (towards periodofacquisition of asset), the assessee is entitled to depreciation @ 50%on all newcommercial vehicles arnuirpd within the stipulated time frame. The Table to NewAppendix-Iprescribing the rates at which depreciation is admissible has also been simultaneouslyamended by the CBDT in excise of powers conferred to it by Sec. 295 of the IncomeTaxAct, 1961, Therefore, applying lower rate of depreciation in variance with the special rateof depreciation allowance do not resonate with the amended position of law. We thus, findconsiderable merit in the plea taken on behalf of the assessee as noted inprecedingparagraph. The action of Revenue to restrict the higher depreciation to only first yearwhere assets were acquired is devoid of sound basis and contrary to the notification.Consequently, we set aside the order of the CIT(A) and direct the AO to restore theclaimof depreciation allowance on commercial vehicles at accelerated percentage."

6. In view of the above decision of the Coordinate Bench of the Tribunal in assessee'sowncase for A.Y.2011-12, following the same, we allow the claim of the assesseefor theenhanced depreciation at the rate of 50%, and allow ground of appeal of the assesseeinboth the years.

7. In the result, both appeals of the assessee are allowed.

Further, reliance is placed on decision of Hon'ble Ahmedabad ITAT in thecaseofUdaykumar C. Patel In 1TA No 1735 & 2300/Ahd/2016 dated 06/02/2019hasheld as under:

"16. We have heard the rival contentions and perused the materials available onrecord. Atthe outset, we note that the ITAT in identical facts and circumstances in the owncaseofthe assessee in ITA No. 3109/Ahd/2013 pertaining to the A.Y. 2010-11 vide order dated29.09.2016 has decided the issue in favor of the assessee. The relevant extract of theorder is reproduced as under:

9. During course of proceedings before us, Id. D.R. relied on the order of A.O., ontheother hand, Id. A.R. relied on the order of CIT(A) and furnished the copy of ITAT,Ahmedabad Co-ordinate Bench in assessee's own case for A.Y.2009-10, whereinITAThasdecided the issue in favour of assessee by confirming CIT(A)'s order of that year byobserving as under:

10.1, The assessee has claimed excess depreciation of Rs.3,69,604/- onthenewcommercial vehicle purchased. The AO's objection was that those vehicles werenotregistered by the RTO "Commercial Vehicle", therefore the assessee was not entitledforadditional depreciation claimed @ 50% on those vehicles acquired during the year, Whenthe matter was carried before the first appellate authority, Id.CIT(A) has examinedtheprovisions of Motor Vehicle Act and allowed theclaim as follows:-

I have carefully perused the assessment order and the submissions given by the appellant.The A.o. has disallowed the claim of depreciation at higher rate as it has been heldbyhimthat the vehicle was not a commercial vehicle. The A.O. has taken the meaningofcommercial vehicle in common parlance and has held that commercial vehicle is distinctand different from private vehicle and the vehicle used by the appellant is a privatevehicle,The appellant has submitted that as per Note No. 5 to the Rules in Appendix-I, thewordcommercial vehicle has been defined to include Light Motor Vehicle as definedbvMotorVehicle Act,1988. Further, section 2(21) of the Motor Vehicle Act define the wordLightMotor vehicle as -

Light Motor Vehicle means transport vehicle or amnibus. The gross vehicle weight ofeither of which or a Motor Car or a Tractor or road roller, theunladen weight of anyofwhich does not exceed 7500 Kg."

The appellant has further submitted that as per theRC Book, the vehicle is LMVandtheweight of the car is 2074 Kg. and the unladen weight is 1454 Kg. which was lessthan7500Kg. Therefore, the appellant has claimed that the car purchased was acornmercial vehicle and appellant was entitled to depreciation at higher rate

After considering the submission of the appellant and the facts, I aminclined to accept thesubmission made by the appellant. The Clause VI-A of the Appendix i.e. the tableof ratesof which depreciation is admissible prescribes the depreciation @50%for newcommercial vehicle which is acquired on or after 01/01/2009 but before 01/04/2009 and is put tousebefore 01/04/2009 for the purposeof business orprofession. Further paragraph6of thenote belowthe table defines commercial vehicles which includes Light Motor Vehiclesasper the Motor Vehicle Acts, the specifications for which are reproduced in theprecedingparagraph. Therefore, it is clear that the appellant is entitled for depreciation@50%which was given as an incentive for a short period between 01/01/2009 to 01/04/2009butthe period was later on extended upto 01/10/2009. The vehicle purchased bythe appellantfulfills all the conditions prescribed in the Income Tax Act and the related Motor VehicleAct and falls within the definition of Commercial Vehicle. The Act has nowhere prescribedthat a commercial vehicle should be a vehicle which is used for the purpose of hire. It onlyprescribes that the vehicle should be used for the purpose of business or profession. Theappellant is, therefore, entitled for the depreciation @50%. The ground of appeal isaccordingly allowed."

11. On hearing both the sides, we are of the considered view that Id.CIT(A) has rightlyinterpreted the relevant provisions of Motor Vehicle Act, wherein the word "Commercial Vehicle" has been defined. Once the relevant Act has given a specification in respect of aparticular type of vehicle, then there is no scope left to interpret the commercial vehicleasper common parlance or common understanding. The finding in this regard of Id.CIT(A)ishereby confirmed. This ground of the Revenue is dismissed.

10. We have heard both the sides and perused the material on record. We findthat inview of above stated facts and legal findings the Id. CIT(A) has correctly decidedtheissuein favour of assessee by making reliance on the order of IT AT, Ahmedabad incaseofACIT vs. M/s. Voltamp Transformers Ltd.(supra).

11. In the result, the appeal filed by Revenue is dismissed." 16.1 As the facts inthecaseon hand are identical to the facts as discussed in the above case, therefore respectfully following the same we do not wish to deviate from the view taken by the Ld.CIT(A). Hence,the ground of appeal of the Revenue is dismissed. "

7.5 It is observed that similar claim of depreciation made by AO is already allowedbyAO while passing the assessment order of A.Y. 2011-12. Considering binding of Hon’bleAhmedabad ITAT, disallowance of depreciation made by AO for Rs.3,45,576/- is deleted.This ground of appeal is allowed.

15. Being aggrieved by the order of the Ld. CIT(A), the Revenue is inappeal before us.

16. Both the ld. DR and the Ld. AR before us relied on the order passedtheauthorities below as favourable to them.

17. We have heard the rival contention of both the parties and perusedthematerials available on record. At the outset, we find that this issue is squarelycovered in favour of the assessee by the decision of the Hon'ble HighCourtofBombay in the case of CIT v. Birla Global Asset Finance Co. Ltd. [2012] 76DTR342, where the Hon'ble High Court has defined the term'commercial vehicles' inlight of Motor Vehicles Act and held that commercial vehicle includes light motorvehicles. The Hon'ble Bombay High Court in the case of CIT v. ShahRukhKhan[IT Appeal No. 1206 of 2010, dated 29-8-2011] had considered a verysimilarissue and held that commercial vehicle includes light motor vehicle also. Inthiscase, there is no dispute with regard to fact that higher depreciationclaimedonthe vehicles is light motor vehicles which were acquired on or after specifieddate.Therefore, we are of the considered view that the assessee is entitledfor higherdepreciation @ 50% on motor vehicles and thus, we direct the AssessingOfficerto delete additions made towards excess depreciation on motor vehicles. Hence,the ground of appeal of the Revenue is hereby dismissed.

18. The next issue raised by the revenue is that the Ld. CIT(A), erredindeleting the disallowance made by the AO for the depreciationonbuilding/furniture and fixture. Likewise, the Revenue in ground No. 4also challenged the deletion of the repair and maintenance expenses on suchbuildingsat Mumbai and Bunglow at Ahmedabad.

19. The AO during the assessment proceedings found that thereweretwoproperties of the assessee which were used by the Shelby Limited. Inthepropertyat Mumbai, one OPD clinic of Shelby was being operated for the follow-uppatient.Likewise, property in Ahmedabad was used by Shelby Limited as a guest houseforthe patient who have taken treatment from the Shelby Hospital. As per theAO,the depreciation can be allowed if the asset is used for the purpose of business. Inthe present case, the buildings were owned by the assessee but the samewerenot use for its business purposes. Therefore, the AO disallowed the claimof theassessee for the depreciation on buildings for Rs. 1,01,91,658/- andthedepreciation on furniture and fixture of Mumbai building of Rs. 2,946 only.

20. Likewise, the AO also added the expenses incurred by the assesseeunderthe head repair and maintenance amounting to Rs. 6,01,593/- whichwereincurred in connection with the properties discussed above used by theShelbyLimited.

21. On appeal, the assessee before the Ld. CT(A) submitted that whateversurgical items were manufactured by it were supplied only to Shelby Limited. M/sShelby limited in turn uses these surgical items on the patient who approacheditfor the purpose of surgeries. Thus, the buildings were provided to ShelbyLimitedto generate the business by the assessee. Accordingly, there was adirectcommercial expediency in giving building to Shelby Limited for the purposeof thebusiness. The Ld. CIT(A), after considering submission of the assesseedeletedtheaddition made by the AO by observing as under:

8.2 I have carefully considered the assessment order and the submission filedbytheappellant. The AO has observed that appellant had claimed depreciation on officebuilding(Mumbai) and office premises(Parth 18 and 22) of Rs 1,01,88,712/- and furniture&fixturefor Rs 2946.. As AO was of the view that appellant has not carried out any businessactivity, he issued show cause notice to appellant and reply of appellant is reproducedatpage no 6 of the assessment order. The AO has observed that ownership of asset iswithappellant company but as per provisions of section 32 of the Act, asset must beusedfor the purpose of appellant's business and this condition is not satisfied by appellant asappellant has stated before AO that such premises were used by Shalby limitedonbehalfof it. During the course of assessment proceedings, AO has carried out inspectionofbungalow No 18 5. 22 through inspector and his report is produced at page No8&9ofassessment order wherein he found that it was used as guest house of Shalby limitedandno business activity of appellant is carried out. The AO has also issued commissionu/s131(l}(d) for Mumoai premises any DDIT(Inv), Unit 4(1), Mumbai has submittedhis reportalong with statement on oath of DrSarnvedna Prakash wherein it was found that Shalbyclinic is carrying out OPD from such address for consulting and follow up for patients "Kneereplacement". The AO observed that appellant has not received rent fromsuchpremisesfrom Shalby Limited and related party is using such premises without any consideration.Though appellant has claimed that it has MOD with Shalby limited for providinginfrastructure and premises but no such understanding was produced. It wasthecontention of appellant that as it was engaged in the business of trading of implantsandsurgical items and most of the purchases are from Ahmedabad, appellant hasnotexplained business use served by giving such premises without any cost to relatedparty.On this basis, AO denied claim of depreciation on building and furniture aggregatingtoRs1,01,91,658/-.

8.3 During the course of appellate hearing, appellant has contended that almost theentiresales of it are to Shalby Limited and, therefore, it was entirely in the interest of theappellant-company that the business of sale of implants should increase. The best thingwas to promote and help the business of Shalby Hospital to grow, as there was directNEXUS between the business of Shalby Limited with that of business of assessee-company.Therefore, with a mutual understanding and as desired by Shalby Limited thesepremiseswere made available to Shalby Limited for business use also to enable the assessee-company to increase its business. The appellant has claimed that both the premiseswereused by Shalby limited for consultation of patients and follow up after theimplantoperations and such arrangement was made just to boost sales of appellant company. Theappellant has also referred to decision of Hon'ble Supreme court in the caseof S.A.Builders Limited(supra) wherein it was stated that expenditure incurred out of commercial expediency is allowable business expenditure, So far as contention of AOthat appellanthas given premises to related party and no rent has been changed, appellant has claimedthat premises were used by them out of commercial expediency as referred supraandbenefit derived by Shalby limited was incidental hence depreciation cannot be disallowed.It was also contended by appellant that business model of it only establishes reasonforproviding premises to Shalby limited hence there was no need to produce MODtoAO. Theappellant has alternatively claimed that as both the companies are payingtaxesatmaximum marginal rent , there is no evasion of taxes for which reliance was placedondecision of CIT Vs Glaxo Smithkline Asia (supra). On this basis, appellant has claimedthatdepreciation need to be allowed.

8.4 On careful consideration of entire facts, it is observed that AOhas disalloweddepreciation on assets at Mumbai and Ahmedabad only on the ground that suchassetsareused by Shalby Limited and not used by appellant. As discussed while adjudicatingtheissue of disallowance of advertisement expenses in preceding para, it was foundthatappellant is engaged in manufacturing of surgical items and trading of implantsandsurgical items and majority sates of appellant company are to Shalby limited as suchitemsare used by said company for "Knee " replacement" . During the course of business andtoboost up the sales, appellant has claimed that it has mutually agreed with Shalbylimitedthat such company will use both the premises of appellant for post-operativephysical therapy or incidental care of patients who has actually used appellant company'sdevices/implants in surgery. The AO has deputed inspector for verification of Ahmedabadpremises and commission u/s 131(l)(d) of the Act for Mumbai premises and he foundthatboth the premises are used by Shalby Limited for such purpose. Even statement of DrSamvedana Prakash was also recorded by DDIT(Inv)Unit 1(4),Mumbai whereinhehasadmitted that such premises are used for running OPD for the consulting and followupforthe patients of " Knee replacement" The appellant has claimed that a large number ofpatients came from Mumbai for knee implant in Shalby limited and therefore anOPDatMumbai for consultation and follow-up is absolutely necessary for the satisfactionof thepatients and for procuring more and more business, it was necessary to open consultationroom at Mumbai. Thus, there is force in the contention of appellant that topromotebusiness entirely in the interest of the assessee and increase sales, these premisesweremade available to Shalby Hospital. The facts discussed herein above clearly provethatsuch premises are used by Shalby limited which is directly connected with business activityof appellant and part of business strategy as discussed herein above.

8.5 So far as observation of that appellant has given premises to related partyandbusiness of appellant is not such which warrant that property needs to be givenonrent, itis observed that purpose of giving such premises being business exigencies arealreadydiscussed herein above. Even the transactions of sales of implants and surgical itemsbyappellant to shalby limited is at arms length price as no adverse observations is maderegarding such transactions by AO of either parties and assessment order of Shalbylimitedwas also passed u/s 143(3) of the Act. Thus, above observation cannot lead to conclusionthat appellant is not entitled to depreciation on assets owned by it

8.6 So far as observation of AO that no rent or consideration has been chargedfromtherelated party, it is observed that premises were given to Shalby Limited for commercial expediency and not let out as rented property. It is observed that during the courseofappellant's business and to increase demand, such premises were made availabletootherparty to promote business jointly. It is a contribution by appellant companyfordevelopment of business which ultimately benefits appellant company in substantial manner. Hon'ble Delhi High Court in case of Tupperware India (P.) Ltd. vsCIT[2015] 60 taxmann.com 350 has held as under:

"Section 37(1) of the Income-tax Act, 1961 - Business expenditure -Allowability of (Taxes)- Assessment year 2007-08 - Assessee entered into contract manufacturing agreementswith two companies for manufacture of Tupperware Plastic products - Assessee'sparentcompany provided requisite moulds to said contract manufacturers ona'freeofcost basis', which were then used by said entities for manufacturingprocess-Excise department levied excise duty and interest thereon tocontractmanufacturers - Excise authorities also levied duty on notional mouldvalue-Additional excise duty liability was borne by assessee as it was inrespectofliability that arose on contract goods manufactured for assessee - Assesseeclaimed deduction for additional excise duty under section 37(1) - Revenueauthorities rejected assessee's claim taking a view that payment was made by assesseeonbehalf of contract manufacturers as a part of a collusive attempt to evade tax - Whethersince contract manufacturers were carrying out manufacturing activityforassessee and it was in assessee's business interests that all tax liabilitiesofmanufacturers were duly satisfied, by assessee, payment in questionwastoberegarded as business expenditure, and thus, allowable under section37(1)-Held, yes [Paras IS and 21] [In favour of assessee]

8.7 The ratio of above decision squarely applies to appellant's case in as much as inabovecase, it was found that "Where contract manufacturers were carrying out manufacturingactivity for assessee and it was in assessee's business interests that all tax liabilitiesofmanufacturers were duly satisfied, payment towards tax liabilities of contractmanufacturers was to be regarded as 'business expenditure"'and in present case,as appellant's majority sales were depended on Shalby Limited, appellant has allowedsuchother party to use its premises which has helped appellant in its business. TheHon'ble Delhi High court in the case of Punjab Stainless Steel Ind V CIT 324 ITR396haselaborated that commercial expediency, in their view, would include such purposeasisexpected by the assessee to advance its business interest and may include measurestakenfor preservation, protection or advancement of its business interests. The business interestof the assessee has to be distinguished from the personal interest of its directorsorpartners, as the case may be. It is observed that appellant has allowed other partytousetheir premises only out of commercial expediency which is for advancement of businessinterest.

8.8 It is observed that provision on depreciation in the Act reads that the asset must be"owned, wholly or partly, by the assessee and used for the purposes of the business. TheAO has accepted the fact that both the premises are owned by appellant. So far asword"for the purpose of business" as used in section 32 of the Act is analogous to similar wordused in section 36(l)(iii) and 37(1) of the Act. The Hon'ble Supreme court in thecaseofS.A. Builders 288 ITR 1 [LQ/SC/2006/1284] at para 22 has observed that "In our opinion, me decisions relatingto section 37 of the Act will also be applicable to section 36(l)(iii) because in section37

also the expression used is "for the purpose of business". It has beenconsistentlyheld in decisions relating to section 37 that the expression "for the purposeofbusiness" includes expenditure voluntarily incurred for commercial expediency,and it is immaterial if a third party also benefits thereby." While adjudicatingtheissue of allowability of advertisement expenses, the issue of "for the purpose of business"was elaborately discussed in preceding paras and decisions relied upon thereinalsosquarely apply to the facts of the case. The Hon'ble Delhi High court in thecaseofv.Tupperware India (P.) Ltd. [2015] 229 Taxman 318 [LQ/DelHC/2014/3560] /53 taxmann.com232hasalso held as under:

For the purpose of business' is a word of wide import and includes expenditurewhicha businessman incurs for business and commercial expediency. The questionofreasonableness is not for the revenue to decide. Further, expression 'whollyandexclusively' as observed by the Supreme Court in Sasson J. David and Co. (P) Ltd. v. CIT[1979] 118 ITR 261 (SC)], does not mean 'necessarily'. Even expenditureincurredvoluntary and without any necessity, but for promoting business andearningprofit is allowable."

8.9 It is matter of fact that Hon'ble Supreme court in the case of ICD5Limited29Taxman.com 129 at para 15 of order has observed that "We would like to disposeof thesecond contention before considering the first. Revenue argued that since the lesseeswereactually using the vehicles, they were the ones entitled to claim depreciation, andnot theassessee. We are not persuaded to agree with the argument. The Section requiresthatthe assessee must use the asset for the "purposes of business". It doesnotmandate usage of the asset by the assessee itself. As long as theassetisutilized for the purpose of business of the assessee, the requirement of Section32 will stand satisfied, notwithstanding non-usage of the asset itself bytheassessee. " The observation made by Hon'bls Supreme court squarely applies tothefactsof appellant's case as assets are owned by appellant and used for the purposeofappellant's business as elaborately explained herein above.

8.10 It is pertinent to refer to decision of Hon'ble Kolkata ITAT in the case of DCITVsNALCO WATER INDIA LTD in ITA No 2111/Kol/2013dated 05/04/2017whereinit was held as under:

"9. We have given a very careful consideration to the rival submissions. The details of theaddition to fixed assets which were installed in the customer's premises is givenat pages20 to 26 of the assessee's paper book. The assessee has also brought to our noticebyfiling sample copies of some of the agreements whereby the assessee had agreedthat monitoring equipment and pumps would be installed at the clients premises. Thusitbecomes clear that the installation of equipment in the client's premisesofassessee's equipment was necessary and part and parcel of nature of businesscarried on by the assessee. It cannot therefore be said that the equipmentinquestion had not been used for the purpose of the business of the assessee. Thefact that the equipment were used in the business premises of theclientscannot be the basis to disallow the claim of the assessee for deductiononaccount of depreciation. The decision of the Hon'ble Supreme Court inthecaseof ICDS Ltd. vs CIT clearly supports the claim of the assessee in this regard. It isclear from the perusal of the order of AO that the AO's objection was that sincetheequipment in question had not been installed at the assessee's factory premises, it cannotbe said that the equipment were used for the purpose of assessee's business. This reasongiven by the AO for disallowing the claim of the assessee for depredation cannot besustained in view of the factual and legal position discussed as above. We thereforeareofthe view that CIT(A) was fully justified in deleting the addition made by the AOinthisregard. Order of CIT(A) does not call for any interference."

8.11 The ratio of above decision also applies to facts of the case in as much as inabovecases, assets are installed at factor premises of client and such assets were usedbythemand not assessee but as assets were installed for the purpose of appellant's business,depreciation was allowed by Hon'ble ITAT

8.12 Considering the facts discussed herein above and relying upon decisions referredsupra it is held that AO was not justified in denying depreciation of Rs.1,01,91,658/-(1,01,88,712 + 2,946) to appellant. The addition made by AO is thus deletedandthisground of appeal is allowed.

22. Being aggrieved by the order of the Ld. CIT(A), the Revenue is inappeal before us.

23. Both the ld. DR and the Ld. AR before us relied on the order passedtheauthorities below as favourable to them.

24. We have heard the rival contentions of both the parties and perusedthematerials available on record. The assessee in the year under considerationhasacquired properties in Mumbai and Ahmedabad. These properties weregivenbythe assessee to Shelby Limited for their activities. Shelby Limited, runningmulti-specialty hospital chain, was using the premises-based in Mumbai as OPDclinicfacilitating for consultation with patient and the follow-up of patients whohavebeen operated by them. Likewise, the properties of the assessee basedat ParthBungalow-Ahmedabad were being used by Shelby Limited as guesthouseforthepatients who were coming for treatment, follow-up, observation of thepatientsand physical exercise facility was also extended to them. However, theassessee was not charging any rent from Shelby Limited against the use of suchproperties.As per the assessee the entire business was dependent upon Shelby Limited. Inother words, whatever surgical instruments or implants manufacturedbyit were,to the tune of almost hundred percent, were supplied to Shelby Limited. Thus, thegrowth of the business of the assessee was depending upon the growthof ShelbyLimited which was implanting the surgical instruments purchasedfromtheassessee. Thus, the buildings were given to Shelby Limited without charginganyrent who was buying all the manufactured goods. Thus, it can be concludedthatthe buildings were given free of ren for the purpose of commercial expediencyofthe assessee.

24.1 There is no dispute as far as the ownership of the buildings is concernedbut the use of the building was by the hospital i.e. Shelby Limited. The2ndrequirement is this that the building should be used for the purposeof thebusiness. In the case on hand what we find is that the assessee has giventhebuilding to the Shelby hospital which will be used for its business activitiesandeventually, consequently the profit of the assessee will also rise. Thus, inthegivenfacts and circumstances it cannot be said that the building was used by theShelbyhospital and owned by the assessee. In other words, it cannot be saidthat it wasnot used for the purpose of the business of the assessee, keepinginviewcommercial expediency. In view of the above, we do not find any infirmityintheorder of the learned CIT(A). Hence the ground of appeal of the revenueisherebydismissed.

24.2 On similar logic, the repair and maintenance expense incurredonBombaybuilding and Parth Bungalow building at Ahmedabad will also beallowable.Therefore, we do not find any infirmity in the order of the learned CIT(A). Hence,the ground of appeal of the revenue regarding the allowance of repair andmaintenance expenses is also hereby dismissed.

25. The issue raised by the Revenue is that the Ld. CIT(A) erred indeletingtheaddition made by the AO for Rs. 68,20,411.00 representing interest paidtothesister concern.

26. The AO during the assessment proceedings found that the assesseehasborrowed money from its sister concern namely Sigma Wind Power Pvt Ltd(NowSigma Wellness Pvt Ltd.) on which incurred interest cost of Rs. 68,20,411/- only.The AO further found that Sigma Wellness was showing negligibleamountofincome in income tax return. Therefore, the AO was of the viewthat theentiretransaction of borrowing money on interest was an arrangement for reducingthetax liability of the assessee. Therefore, the AO disallowed the same andaddedtothe total income of the assessee.

27. On the appeal before the learned CIT(A), the learned CIT(A) waspleasedto delete the addition made by the AO by observing as under:

9.3 During the course of appellate hearing, appellant has contended that it hasborrowed funds from SWPL and funds were used for its business purpose hencesuchinterest cannot be disallowed. The appellant has also contended it has paid interest @10% which is as per prevailing market rate. The appellant has also argued that if borrowedfunds taken by SWPL would have been directly taken by appellant, AO would haveallowedinterest. The appellant has argued that though interest is paid to related concern, interestcan be disallowed u/s 40A(2)(b) only to the extent that it is not reasonable andinpresentcase, interest is paid as per fair market rate, no disallowance can be made. The appellanthas also argued that as per provisions of section

36(l)(iii), as funds are used for the purpose of business, no disallowance of interestexpenditure is required to be made.

9.4 On careful consideration of entire facts, it is observed that appellant -hair takenborrowed funds from sister concern SWPL and on such borrowed funds, it has paidinterest@ 10%. It is relevant to consider provisions of section 36(l)(iii) which reads as under: "..the amount of the interest paid in respect of capital borrowed for the purposes of thebusiness or profession :

Provided that any amount of the interest paid, in respect of capital borrowedforacquisition of an asset (whether capitalised in the books of account or not); for anyperiodbeginning from the date on which the capital was borrowed for acquisition of theasset till the date on which such asset was first put to use, shall not be allowed as deduction.]"

9.5 It is observed that AO has not disputed the fact that borrowed funds are usedfor thepurpose of business hence as per provisions of section 36(l)(iii) referred supraclearlyprove AO was not justified in making disallowance of interest expenditure paid toSWPLItis observed that AO has even not doubted that interest rate is as per prevailingmarket rate and it is not the contention of AO that interest payment made to relative concernwasat higher rate hence even provisions of section 40A(2)(b) cannot be made applicable.

9.6 It is observed that AO has disallowed entire interest expenditure only on thegroundthat SWPL is showing meager income and has only one source of income i.einterestincome received from appellant company. It is observed that SWPL is separate legal entityand assessed to tax. The said company borrowed funds from third parties and suchfundsare advanced to appellant on which it has received interest income. Merely becausesuchcompany has earned meager net income or pass through entity in opinion of .AO, interestcannot he disallowed in. present case because, borrowed funds are used for thepurposeof business. It is pertinent to note that had borrowed funds were directly takenbyappellant rather than borrowed funds taken by SWPL and advancing to appellant, AOhadno issue for allowability of interest expenditure and such fact clearly support thecontention of appellant that interest expenditure is incurred for the business purposeanddisallowance of such interest cannot be upheld. It is observed that AOwas incorrect inholding that if such interest would have been paid to outside parties , such interest wouldhave been allowed to appellant as third party would have paid taxes on suchinterestincome. Whether third party or SWPL has paid taxes on returned income or not isnotcriteria for deciding allowability of interest expenditure in the hands of appellant unlessit isproved that there is diversion of interest expenditure from SWPL to appellant companytoreduce its tax liability. The AO in present case has not brought anything on recordtoprovethat such funds are not required by appellant or expenditure of SWPL is claimedbyappellant , interest disallowance made by AO cannot be upheld. Considering thesefacts,disallowance of interest expenditure for Rs 68,20, 411/- merely on presumption is deleted.This ground of appeal is allowed.

28. Being aggrieved by the order of the learned CIT(A) the revenue is inappeal before us.

29. Both the learned DR and the learned AR before us vehemently supportedthe order of the authorities below as favourable to them.

30. We have heard the rival contentions of both the parties and perusedthematerials available on record. The thrust of the revenue was that the siter concernwho has given loan to the assessee on interest was showing meagreamountofincome and therefore there was some colourable device adopted by theassesseeto reduce its taxable income. In simple words the assessee has arrangeditsaffairswith the sister concern in such a way to reduce its tax liability. As per theAO, theassessee is claiming expenses in the name of interest expenses and ontheotherhand sister concern was also not paying/ not showing any taxable incomeinitsincome tax return.

30.1 From the finding of the learned CIT(A), we note that sister concernbeingSigma Wellness has borrowed money on interest from third party whichwasgivento the assessee. It means the money given by the sister concern to theassesseedid not belong to the sister concern rather the ownership of the moneywaslyingwith some other third party. In a situation where the assessee couldhaveborrowed money from the 3 rd party on interest basis then the samecouldnothave been question by the AO. Thus, if the same money has routedthroughthesister concern, then the interest cost on the same cannot be disallowedmerelyonthe reasoning that sister concern is declaring meagre amount of incomeintheincome tax return. It is quite natural that sister concern has borrowedmoneywhich has been advanced to the assessee again on interest basis, thenthenetresult on the interest cost incurred by the sister concern and the interest earnedon the money advanced to the assessee will be the difference of the interest costand interest income which is certainly going to be a negligible amount of income.Thus, in such a situation we are of the view that the basis of makingthedisallowance of interest expenses by the AO is based on wrong assumptionoffacts. Hence, we do not find any infirmity in the order of learnedCIT(A)andaccordingly we uphold the same. Hence the ground of appeal of therevenueishereby dismissed.

31. In the result, the appeal filed by the revenue is dismissed.

Coming to ITA No. 584/Ahd/2020, an appeal by the RevenueforAY2011-12

32. The Revenue has raised following grounds of appeal:

I. The Ld.CIT(A) has erred in law and on facts in deleting the disallowanceof Rs.1,50,17,230/- on account of advertisement expenditure without appreciatingthat theassessee had failed to establish any business exigency pertains to that advertisements.

II. The Ld.ClT(A) has erred in law and on facts in deleting the disallowanceof Rs.1,50,17,230/- on account of advertisement expenses without appreciating the fact that all advertisements mention only two words 'Xeon Devices' and do not mentioneventhe address of the assessee or the product of the assessee. These advertisements cannot inany way be construed to serve business purpose of the assessee

III. The Ld.CIT(A) has erred in law and on facts in deleting the disallowanceofdepreciation amounting to Rs. 94,71,303/- on building and Rs. 1,43,054/- on furnitureandfixtures.

IV. On the facts and circumstances of the case, Ld C1T(A) ought to have upheldtheorder of the Assessing Officer.

V. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of theAssessing Officer be restored

33. At the outset, we note that the issues raised by the Revenue inits groundsof appeal for the A.Y 2011-12 are identical to the issues raised by the RevenueinITA No. 583/AHD/2020 for the assessment year 2010-11. Therefore, thefindingsgiven in ITA No. 583/AHD/2020 shall also be applicable for the year underconsideration i.e. AY 2011-12. The appeal of the Revenue for the assessment2011-12 has been decided in favour of the assessee and against Revenue. Thelearned DR and the AR also agreed that whatever will be the findingsfortheassessment year 2010-11 shall also be applied for the year under considerationi.e.A.Y 2011-12. Hence, the grounds of appeal filed by the Revenue areherebydismissed.

34. In the result, the appeal of the Revenue is hereby dismissed.

35. In the combined result, both the appeals of the Revenue areherebydismissed.

36. Order pronounced in the Court on 27/09/2023 at Ahmedabad.